Item 1. Description of Business.
Cyber Merchants Exchange, Inc. d.b.a C-ME.com (the "Company" or "C-ME") is a business-to-business e-commerce company serving the worldwide retail industry.

Summary
Originally named World Wide Magic Net, Inc., C-ME was founded in 1996 and provides Internet turnkey solutions to streamline the retailers' merchandise sourcing (front-end) activities. The company's solutions include its proprietary Internet Sourcing Network ("ISN") -- a private extranet that links the company's retail partners with their vendors. The ISN provides retailers a desktop solution to reduce the cost of front-end merchandise sourcing activities while expanding the retailer's vendor base. Other services include Internet EDI (Electronic Data Interchange) (upon retailers' request) -- a platform that provides a back-end efficiency to process purchase orders, invoices, packing lists and shipping documents, the Virtual Trade Show ("VTS"), located at www.c-me.com - a product showcase forum that allows retail buyers to quickly search among thousands of vendors' products, Wholesale Auction Center ("WAC") (planned launch: Spring 2000) - a place where vendors list closeouts, odd lots in bulk quantity and allows smaller retailers, jobbers and others instant access, and Factory Outlet Mall ("FOM") (planned launch: Spring 2000) - a full e-commerce package that will consist of secure credit card transaction processing and shopping cart functions including automatic calculation of freight and sales tax, Manufacturers will be able to sell goods directly to consumers. Currently, C-ME.com's major retail partners include Factory 2-U Stores (NASDAQ:FTUS) and Burlington Coat Factory (NYSE:BCF).

Overview
The Company provides its customers with an Internet-based communications system that enables retailers and vendors to conduct negotiations and to electronically facilitate the sourcing, and the purchase and sale of merchandise on a global basis. Using C-ME's proprietary software, the Company maintains a secure yet open electronic network that enables retailers to conduct on-line communications and transactions with their vendors. The front-end communications and trading process is generally referred to in the retail industry as "sourcing." High volumes of product and transaction data are exchanged between retailers and their vendors in order for buy-sell transactions to be initiated, negotiated and consummated. This critical sourcing process typically requires a substantial amount of time and attention from both the retail merchandise buyer and the vendor representative. The Company's related software products and services are designed to make this sourcing function substantially more effective and efficient.

When utilized to their full capability and employed on a wide-scale basis, the Company believes that its products can reduce a retailer's cost of sourcing and, more importantly, substantially expedite the sourcing process and more effectively manage the quality performance of vendors. Consequently, the Company's software products and services enable merchandising, purchasing and shipping decisions to be made by all parties at dates closer to the selling season, helping such parties make better informed and more timely business decisions. The objective is to enable its retail partners that source products through the Company's software and services to obtain lower costs, increased sales volume, faster inventory turnover, fewer involuntary price discounts and improved margins and profitability.

Company History
The following is a brief chart of major events of the Company since inception:

Item 2. Description of Property.
The following sets forth information as to the location and general character of the principal business facilities of the registrant.

Facilities
The Company leases its principal offices located at 320 South Garfield Avenue, Suite 318, Alhambra, California 91801. The area is approximately 3,000 Square Feet. The lease will expire on September 30, 1999

The Company has signed a new lease and will relocate its principal offices to Pasadena after the previous lease expires. The new address will be 600 S. Lake Ave., Suite 405, Pasadena, CA 91106. Telephone number (626) 793-5000. This new location has approximately 2,000 Square Feet of office space. This new lease provides for a gross rent of $3,520.80 per month and will expire October 30, 2002. The Company does not have any renewal options on the new lease.

Item 3. Legal Proceedings.
The Company has been named as a defendant, along with BCF, in a lawsuit brought by Stanley Rosner ("Rosner"), an individual. In March, 1998, Rosner commenced an action in the Supreme Court of the State of New York, Nassau County, New York (Index No. 98-006524). Rosner alleges breach of oral and written contracts between the Company and Rosner and between BCF and Rosner in 1997. Rosner claims that he is due certain fees from both the Company and BCF for services allegedly rendered in connection with certain transactions and alleged transactions involving the Company and BCF. Such transactions and alleged transactions relate to the Internet services that the Company may provide to BCF, and contemplated transactions arising from vendors of BCF. Rosner claims that he is due damages in an amount not less than $5,000,000 plus unspecified punitive damages from both the Company and BCF. Rosner's attorney has agreed that the Company and BCF are entitled to have the venue of the lawsuit transferred from Nassau County, New York to New York County (Manhattan), New York; Rosner's attorney also agreed to arrange for the transfer. Rosner's attorney also agreed that the Company's and BCF's responsive papers would be due no later than ten (10) days after notice of such transfer had been served. To date, the Company has not received notice of the proposed transfer of venue and has not filed its responsive papers or otherwise moved against the complaint. The Company intends to vigorously defend this action. The Company believes that it is not obligated to make any payments to Rosner and has meritorious defenses to all of Rosner's allegations. However, if the Company does not prevail and a significant damage award against the Company is granted, this would have a material adverse effect upon the Company.

Item 4. Submission of Matters to a Vote of Security Holders.
None

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.
The registrant's common stock is traded on the Over The Counter Bulletin Board (OTC-BB) under the symbol "CMEE". The following table sets forth, for the periods indicated, the range of high and low sales prices of the Company's common stock as quoted by various market makers for the period of July 22, 1999 through September 22, 1999. There is no publicly trading range as of June 30, 1999. These prices do not include broker-dealers' mark-ups, markdowns or commissions, and may not represent actual transactions. The Company did not pay dividends in fiscal year 1996, 1997, 1998. The Company has no plan to pay dividends in the near future.

June 30, 1999 - No public trading record

July 22, 1999 to September 22, 1999
High: $11.00
Low: $2.50

The registrant's common stock is held by approximately 520 shareholders as of June 30, 1999. Among them, there were 7 institutional shareholders.

Item 6. Management's Discussion and Analysis or Plan of Operation.
The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in the annual report for the fiscal year ended June 30, 1999. This annual report contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein.

Introduction
The Company was formed in July, 1996 to develop, establish, and market web-based e-commerce solutions for retailers and their supply chains. These solutions take the form of five current and planned interlocking services: (1) an Internet Sourcing Network ("ISN"), (2) a Virtual Trade Show ("VTS"), (3) Internet EDI (which will be provided upon retailer's request), (4) Wholesale Auction Center ("WAC") - planned launch Spring 2000, and (5) Factory Outlet Mall ("FOM") - planned launch Spring 2000. The business strategy of the Company is focused on establishing collaborative relationships with U.S.-based retailers wherein the Company will provide each retailer with an ISN in return for their assistance in marketing the ISN to their supply chain vendors. After establishing ISN's for these collaborative retail partners, the Company intends to use the Internet's global accessibility to expand these retailers' supply chains to foreign producing countries, primarily in the Pacific Rim.

To date, the Company's primary activities have involved developing its VTS and ISN software and database (the "Software"), organizing its sales force, and marketing its VTS and ISN. Research and development costs are expensed as incurred. Selling expenses consist primarily of salaries, commissions, and administrative costs associated with the Company's payroll and marketing personnel. General and administrative expenses include the costs of consultants and other administrative functions of the Company.

Initial Public Offering "IPO"
The Company conducted its IPO as a direct public offering in conjunction with nine participating broker/dealers on a best efforts basis. Participating broker/dealers were: Ace Diversified Capital, AM Razo & Company Securities Inc., Corporate Investments Group Inc., Drake & Company Inc., First Montauk Securities, The Malachi Group Inc., Tradeway Securities Group Inc., Travis Morgan Securities and U.S. Pacific Financial Services. The Company successfully sold 336,173 shares of common stock at $8.00 per share. The net proceeds of $2,283,058 will be used to implement the business plan. The immediate goals are to expand relationships with its current retail partners; Burlington Coat Factory (NYSE: BCF) and Factory 2-U Stores, Inc. (Nasdaq:FTUS), build new retail partners, and organize a new management team.

Financial Condition and Results of Operations:
The Company has had three years of operation.
Fiscal year ended June 30, 1999 compared to year ended June 30, 1998
The following discussion sets forth information for the twelve months ended June 30, 1999 compared with the twelve months ended June 30, 1998. This information has been derived from audited financial statements of the Company contained elsewhere in the annual report.

For the twelve months ended June 30, 1999, the Company had revenues totaling $47,810 representing a decrease of $17,912 from the same period a year ago, due to the Company's shift in focus from marketing its services to the Initial Public Offering process resulting in a decline in fees received from the users of the Company's VTS and web design services. The Company's operating expenses for the twelve months ended June 30, 1999, totaling $712,146, consisted of $107,824 for the cost of revenue and $652,132 for general administration and selling expenses, representing an increase of $125,339 from the twelve months ended June 30, 1998 due to approximately $250,000 expenses related to the IPO process. Consequently, the Company experienced a net loss of $695,454 for the fiscal year ended June 30, 1999 compared to a net loss of $571,360 for 1998.

Year 2000 Compliance Issue
The inability of computers, software and other equipment utilizing microprocessors to recognize and properly process data fields containing a 2-digit year is commonly referred to as the "Year 2000 Compliance" issue. As the year 2000 approaches, such systems may be unable to accurately process certain date-based information. The Company has reviewed all significant internal applications and is in the process of implementing modifications that were considered necessary to ensure Year 2000 compliance. Since the Company has only 3 years' history of operation, all the computer hardware and software are newly purchased and management believes them to be Y2K compliant.

In addition, the Company is in the process of communicating with others with whom it does significant business, to determine their Year 2000 Compliance readiness and the extent to which the Company is vulnerable to any third party Year 2000 Compliance. However, there can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company.

The total cost to the Company of these Year 2000 Compliance activities has not been and is not anticipated to be material to its financial position or to its results of operations.

Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133. "Accounting for Derivatives Instruments and Hedging Activities" which establishes accounting reporting standards for derivative instrument including certain derivative instruments embedded in other contracts and for hedging activities. SFAS 133 was originally to be effective for fiscal years beginning after June 15, 1999. SFAS No. 137 has deferred the effective date of SFAS 133 to all fiscal quarters of fiscal years beginning after June 15, 2000. Management believes that adoption of this statement will not have a material impact on the Company's financial statements.

Status of Operations
Originally, the Company's business model was to solicit vendors to display products on its VTS. Accordingly, the Company solicited approximately 1,800 vendors who had shown some interest in joining the Company's VTS program. The Company was able to complete 600 websites for the vendors who showed interest in the VTS; however, only 250 of the 600 vendors eventually committed to the Company's services. Based on this experience, the Company decided to change its business model. The Company's current business model focuses on the retailer and forming strategic retail relationships. Pursuant to this new business model, the Company plans to utilize the marketing power of its retail partners to attract vendors.

Participation Agreements
On October 15, 1997, the Company entered into a Participation Agreement with Burlington Coat Factory Warehouse Corporation ("BCF"). Under the terms of the Participation Agreement, BCF would assist the Company in marketing the ISN to BCF's vendors in return for a portion of the monthly hosting fees. The Company is required to pay BCF 50 percent of the monthly hosting fees collected from vendors who join BCF's ISN. In addition, the Company granted a warrant to BCF to allow BCF to purchase up to 10% of the outstanding shares of common stock of the Company on a fully diluted basis, subject to certain conditions as defined in the warrant agreement.

On January 27, 1998, the Company entered into a similar Participation Agreement with Factory 2-U Stores, ("F2U"). Under the terms of the Participation Agreement, F2U would assist the Company in marketing the ISN to F2U's vendors in return for a portion of the monthly hosting fees. Unlike the Company's Participation Agreement with BCF, F2U will receive 33 percent of the monthly hosting fees collected from vendors who join F2U's ISN, and F2U does not have a stock warrant for the purchase of any shares of the Company's capital stock.

Income Taxes
Since its inception, the Company has been taxed as a C corporation. The Company has Carryover Operating Losses of $551,847 in 1996, $571,920 in 1997, and $669,540 in 1998. Accordingly, the Company has $1,793,307 available as of June 30, 1999 in federal net operating loss carryover, which can be used to offset future federal taxable income. As for tax purposes in the state of California, the Company had Net Operating Losses in 1996 of $551,847, $571,120 in 1997 and $668,740 in 1999. This gives the Company an aggregate net operating loss for the state of California of $1,791,707. However, the utilization of net operating losses may be subject to certain limitations as prescribed by Section 382 of the Internal Revenue Code.

Liquidity and Capital Resources
The Company's working capital increased from $337,546 as of June 30, 1998 to $1,869,966 as of June 30, 1999 primarily due to the successful IPO. The Company has an average monthly general and administrative expense of $42,737.42 in 1998 and $54,344.33 in 1999. With a working capital of approximately $1.9 Million and an average monthly expense of approximately $55,000, we believe the Company has a high level of liquidity.

Net cash used in operating activities decreased from $522,001 in 1998 to $472,245 in 1999. The decrease reflects the change of accounts payable and accrued expenses from $2,950 to $182,637. In 1998, $99,559 was provided from investing activities, while in 1999, $1,200,200 was used in investing activities. The change was due to the increase of time certificate of deposit into banks. Net cash provided by financing activities increase from $500,000 in 1998 to $2,186,074 in 1999. The increase was due to the proceeds raised from the initial public offering.

During the year ended June 30,1999, the Company maintained a non-revolving line of credit of $300,000 with a bank. All money borrowed by the Company under the line of credit bears interest at the bank's prime rate plus 1.5% and was personally guaranteed by the Company's Chairman and President. The Company issued 20,000 Common Stock warrants, at an exercise price of $8 per share and expires on February 10, 2004 to the bank. The line of credit expired on June 30, 1999.

Forward-Looking Statements
The discussions of the Company's business and activities set forth in this report an in other past and future reports and announcements by the Company may contain forward-looking statements and assumptions regarding future activities and results of operations of the Company. In light of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company hereby identifies the following factors which could cause actual results to differ materially from those reflected in any forward looking statement made by or on behalf of the Company: reliance on collaborative retail partners, market acceptance of Company products and services; changing business conditions or technologies in the industry, which could affect demand for the Company's products and services; the impact of competition; problems with technology; product development schedules; and regulatory factors beyond the Company's control.

Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
On October 1, 1999 the Company filed a form 8-K to report a change in registrant's certifying accountant from KPMG, LLP to BDO Seidman, LLP. The Company had no disagreements with KPMG, LLP with regards to any accounting matter or otherwise. A letter from KPMG, LLP addressed to the Commission was filed as an exhibit to the 8-K filing.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

Directors
Directors of the Company currently do not receive salaries for serving as directors of the Company. There are presently seven (7) directors on the Board. The Company reimburses all directors for any expense incurred in attending Board meetings. The directors and executive officers of the Company and their respective ages and positions with the Company are set forth in the following table.

Howard W. Moore
Mr. Moore has served as Vice-Chairman of the Company since December 1998. Mr. Moore has extensive experience in the toy industry. Beginning in 1948, Mr. Moore started a family toy business called Moore's Toy Stores. In 1957, Mr. Moore founded Toy Barn Stores in Baltimore, Maryland. Then in 1966, Mr. Moore founded and served as the President and Chief Executive Officer of Toy Town, USA, Inc. In 1978, Toy Town, USA, Inc. was sold to Lionel Corporation. From 1978 to 1979, Mr. Moore served as Executive Vice President for Lionel Leisure. Mr. Moore joined Toys "R" Us in 1980 as its Vice President of Purchasing. From there, Mr. Moore became the Toys "R" Us' Executive Vice President and General Merchandising Manager. In addition, in 1983, Mr. Moore was appointed a member of Toys "R" Us' Executive Committee, where he served until 1990. In 1985, Mr. Moore was appointed to the Board of Directors for Toys "R" Us, where he continues to serve to this day. In addition, Mr. Moore serves as a member of Toys "R" Us' Governance Committee. In 1990, Mr. Moore retired from Toys "R" Us and founded Howard Moore Associates, which provides consulting to the toy industry in the areas of marketing, product licensing, and merchandising/packaging. Currently, Mr. Moore acts as a consultant for Today's Kids, Leapfrog, Wild Planet, Catylist, and Whamo as well as for start-up companies, product developers, and toy inventors. Finally, Mr. Moore has brokered the sale of four toy companies plus multiple product lines.

Frank S. Yuan
Founding the Company in 1996, Mr. Yuan has served as the Chief Executive Officer, President and Chairman of the Board since the Company's inception. Mr. Yuan has a well-diversified business background, which includes more than 20 years experience in the apparel and computer wholesale industries. In 1986, Mr. Yuan founded U.N. Imports, Inc. - a men's apparel import/wholesale company. Mr. Yuan has been working for U.N. Imports, Inc. since 1986. Prior to that, Mr. Yuan founded Frenchy's Clothing Co., a 3 store men's clothing retail chain, and Foria International, Inc., a men's clothing line that manufactured apparel under the "Knights of Round Table" label. Mr. Yuan also co-founded UNI-CGS, Inc. -- a computer hardware importer and wholesaler. Besides experience in the apparel and computer industries, Mr. Yuan also has substantial experience in real estate where he founded UNI-Fortune Company. UNI-Fortune was responsible for developing and selling two retail shopping centers, three office buildings, six condominium projects, and a 400+ unit apartment complex. Mr. Yuan was also the co-founder of two community commercial banks -- United National Bank and EverTrust Bank. Lastly, Mr. Yuan founded and served as the Chairman of the Board for Western Cities Titles Insurance Company. Mr. Yuan has a B.A. in Economics from Fu-Jen Catholic University in Taiwan (1970) and a M.B.A. from Utah State University (1973).

Charles Rice
Mr. Rice has been a member of the Company's Board of Directors since February 1, 1997. Mr. Rice has 30 years of experience in wholesale apparel buying. He has extensive buying experience as a men's apparel buyer for Sears, Roebuck and Company and Montgomery Ward. Mr. Rice is currently employed by Deer Creek Enterprises, Ltd. where he serves as a manufacturer's representative for Sunkyong America/Leader Apparel. Mr. Rice has a B.S. in Business and Economics from the University of Delaware (1963).

Deborah Shamaley
Mrs. Shamaley has been a member of the Company's Board of Directors since February 1, 1997. In March 1985, Mrs. Shamaley co-founded the Texas Apparel Group. The Texas Apparel Group was later renamed The Apparel Group (TAG). TAG specialized in buying and selling wholesale/retail, off-price/close-out women's apparel. TAG grew to 228 employees with 23 retail outlets across Texas, New Mexico, Arkansas, Oklahoma, Missouri, and Mexico, including 8 franchise outlets. TAG sold to 1,800 wholesale accounts; which included BCF, Sears, J.C. Penney's, Nordstrom, Sam's, 50 Off, Factory 2-U, and One Price Clothing Stores. Sales rose from $1.08 million in its first year of business to $37.3 million at its peak. In 1996, Mrs. Shamaley sold her interest in TAG and has since retired.

Robert H.J. Lee
Mr. Lee has been a member of the Company's Board of Directors since February 1, 1997. Mr. Lee was the founder and President of PicoPower Technology, Inc. which specialized in inventing low wattage chips for use in the growing portable computer market. During the three years PicoPower was in business, its sales rose to $40 million. In 1994, PicoPower was sold to Cirrus Logic for approximately $60 million. From 1995 to 1996, Mr. Lee served as Corporate Vice President for Cirrus Logic. In 1996, Mr. Lee became an independent venture capitalist. In April, 1997, Mr. Lee joined 2M Invest Corp. (a venture capital fund) and became its Managing Director. Mr. Lee also serves as the Chairman for several companies including Link Max, Inc. (a company specializing in Intranet services), Cycore A/S (a Swedish corporation specializing in 3-D graphics rendering and special effects rendering software), and Kaukas Systems, Inc. (a company specializing in providing a voice call back response service for doctors). Mr. Lee has a degree from Chien-Hsien Institute of Technology in Taiwan (1975) and a M.S. in Computer Science from Stevens Institute of Technology (1982).

Robert Hsieh, Ph.D.
Dr. Hsieh has been a member of the Company's Board of Directors since February 1, 1997. Dr. Hsieh currently serves as the Vice-Chairman of Microtek Lab, Inc. (USA) and Microtek International, Inc. (Taiwan). Dr. Hsieh founded Microtek Lab, Inc. and was the guiding force behind the development of its desktop scanner business. Under Dr. Hsieh's leadership, Microtek launched the industry's first desktop scanner in 1984, which has grown progressively since then to include a full array of color and grayscale models. Dr. Hsieh also co-founded, and is the Co-Chairman of Ulead Systems - a Windows-based applications software company. Dr. Hsieh has also served on numerous Boards of Directors for high-tech companies, including C-Cube, Sierra Imaging Technology, and Hologram Imaging Technology. Dr. Hsieh has a B.S. degree in Electrical Engineering from National Cheng Kung University in Taiwan (1968) and a M.S. (1971) and Ph.D. (1978) in Electrical Engineering from the University of Cincinnati.

Peter Lin
Mr. Lin has been a member of the Company's Board of Directors since February 1, 1997. Mr. Lin is currently a Senior Financial Analyst specializing in mergers and acquisitions for Watson Pharmaceuticals, Inc. Prior to that, Mr. Lin was a Corporate Actions Analyst for Capital Research and Management Company from September, 1993 to September, 1996 and for the Franklin Templeton Group from October, 1992 to September, 1993. Mr. Lin was an Associate Portfolio Manager in Global Investment Advisors, Inc., the General Partner of Global Strategic Investment, and is the Investment/Portfolio Manager of the Lotus Group. Mr. Lin has a B.S. in Business Administration from University of California, Berkeley (1991) and a M.I.S. degree from Claremont Graduate University in California (1998).

James Zheng
Mr. Zheng serves as the Company's Chief Technology Officer and was instrumental in designing, developing, and implementing the Company's product driven search engine, database structure, and on-line purchasing/ordering systems. Mr. Zheng also designed and built the Company's network, based on TCP/IP. Concurrent with his responsibilities at the Company, Mr. Zheng owns a multimedia company (HZ Multimedia, Inc.) where he develops interactive multimedia application in the areas of corporate presentation, marketing, and computer-based training as well as provides consulting services in cross-platform multimedia and Internet application development. Some of his clients have included Fidelity National Title Insurance Company, Toshiba of America, LPL Financial Services, Ross Roy Communications, Inc., Santa Fe/Burlington Northern Railroad, JLG Technology, and Mazda Motor of America. Mr. Zheng also worked at AIMS Multimedia from 1994 to 1996 where he functioned as a software engineer, webmaster and UNIX systems engineer. Mr. Zheng has a B.S. degree in Computer Science from Zhengzhou University, China (1989). Mr. Zheng has a M.S. degree in Computer Science from University of California, Riverside (1992), where he is a Ph.D. candidate.

Joseph Sloan
Mr. Sloan serves as a consultant to the Company. Mr. Sloan is currently the senior UNIX administrator for Toyota in charge of implementing its call center database, direct response marketing database, web site, external UNIX mail gateway, and new UNIX system. Mr. Sloan has a background in system and network administration of Solaris, SGI Irix, BSD, LINUX and other UNIX systems. Moreover, Mr. Sloan has a background in UNI - PC integration, administration of mail, DNS, web and security as well as utility programming in Perl, Shell, C/C++ and other languages. Mr. Sloan has worked at McDonnell Douglas Corporation where he wrote ATE and Mil-1553 avionics test software and Hughes Aircraft Co. where he was responsible for large scale naval electronics warfare systems for the Navy of the Republic of China. Mr. Sloan has an Associate Degree in Electronics Technology from Fullerton College (1981). Mr. Sloan is currently completing his B.S. Degree in Computer Engineering from California State Long Beach.

Item 10. Executive Compensation.
The following table sets forth, for the fiscal year ended June 30, 1998 and June 30, 1999, annual compensation, including salary and bonuses paid by the Company to each executive officer and all executive officers as a group. No other executive officers received more than $100,000 in 1998 and 1999.

Summary Compensation Table

Item 11. Security Ownership of Certain Beneficial Owners and Management.

Common Stock Ownership
The following table sets forth certain information known to the Company regarding the beneficial ownership of the Company's Common Stock as of June 30, 1999, and as adjusted to reflect the sale of the Shares offered hereby, for (i) each executive officer or director of the Company who beneficially owns Shares; (ii) each stockholder known to the Company to beneficially own 5 percent or more of the outstanding Shares of its Common Stock; and (iii) all executive officers and directors as a group. The Company believes that the beneficial owners of the Common Stock listed below, based on information furnished by such owners, have sole investment and voting power with respect to such Shares, subject to community property laws where applicable. The actual ownership of common stocks by the board of directors and executives are listed in the following table.

Item 12. Certain Relationships and Related Transactions.
The Company maintains certain banking relationships such as checking, money market, certificates of deposit accounts, with Evertrust Bank, of which the Company's Chairman and President is a founder and shareholder. As of June 30, 1999, the cash and cash equivalent balance at Evertrust Bank was $570,209, and certificates of deposit balance amounted to $300,000. Management believes that Evertrust Bank offers competitive interest rates and services.

Item 13. Exhibits and Reports on Form 8-K.
On October 1, 1999 the Company filed a form 8-K to report a change in registrant's certifying accountant from KPMG, LLP to BDO Seidman, LLP. The Company had no disagreements with KPMG, LLP with regards to any accounting matter or otherwise. A letter from KPMG, LLP addressed to the Commission was filed as an exhibit to the 8-K filing.